Indexes Fingered For Killing Manager Creativity

Fund managers are suffering from a sore lack of imaginative investing, thanks to the current trend of using benchmarks and indices, according to Peter Lucas of fund management group Ashburton. While acknowledging that investment managers should be held accountable for what they advise, Lucas in an interview with Portfolio International says, “the regular and slavish application of performance benchmarks has stifled creativity in the industry.”

Lucas admits that with active management, managers could make mistakes in picking stocks, but he adds, “If they are any good and they are right more often than they are wrong, the portfolio will enjoy consistent and positive long-term growth.” The ones who suffer most from a lack of creative investing, says Lucas, are the investors.